mpauls

Other info: OPAP Background OPAP S.A. (The Greek Organization of Football Prognostics) operates the lottery and sports betting games of Greece and Greek Cyprus. The company was founded as a state-owned company in 1958. It was reorganized in 2000 and also also a 20-year license as the sole operator of these games in Greece. It went public on the Athens Stock Exchange in 2001, with the Greek government owning an approximate 34% stake in the company. As of 2007, OPAP controlled about 50% of the overall gaming market in Greece (including legal and illegal gaming). OPAP has a right of first refusal on any new games offered or legalized by the Greek government until 2020. Its most popular games are Stihima and Kino. Current Greek Financial Crisis On May 9, 2010, Europe’s Finance Ministers approved a comprehensive rescue package worth almost a trillion dollars aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility. On May 2, 2010, a loan agreement was reached between Greece, other EU members and the International Monetary Fund (“IMF”), consisting of an immediate 45 billion Euro loan provided in 2010, with more funds available later and totaling 110 billion Euros. The terms of the loan include a 5% interest rate and specific and severe austerity measures which Greece has promised to abide by. Including in these austerity measures is the proposed selling off of government held shares of public companies, like OPAP, to raise funds to pay for national debt. However, the Greek government has expressed their interest in retaining their current level of OPAP ownership primarily because OPAP is one of their few assets which generates a healthy profit for them. Political & Regulatory Risks Competition risk. March 2009, European Parliament adopted overwhelming majority resolution calling for solution to online gaming regulation at the national level. An EU inquiry was launched in 2009 into OPAP’s monopolistic status in the Greek gaming market. The Greek government referred this inquiry to the European Court of Justice (“ECJ”). The ECJ has not addressed this referral yet; however, the ECJ has ruled in favor of a Portuguese company similarly situated in Portugal as OPAP is in Greece. There was a similar ruling for a Swedish company by the ECJ. Overall, signs point to the EU continuing to inquire into monopolistic national gaming operators with the hope of slowly chipping away at their monopolies. Also, the EU appears to have a long term desire of taking away from nations their domestic right to regulate gaming. However, it is doubtful this will occur before OPAP’s current contract with the Greek government expires in 2020. This reinforces our view that future earnings calculations for OPAP should be made only until 2020 to be conservative. Current bans on online gaming have hurt OPAP’s business because OPAP faces a formidable competitor in online illegal gaming. It is estimated that illegal, online gaming in Greece generates revenue amounts comparable to OPAP’s top line numbers. This means that OPAP only controls half of the market share (50%) despite having a legal monopoly. The Greek government has indicated that it plans to tackle this issue and signs indicate they may do so by legalized forms of online gambling so that OPAP can compete with the illegal operators. OPAP’s legitimacy as a legal business sanctioned by the Greek government will attract players of the illegal games. Of course, some people will continue to play the illegal games mainly because the illegal games offer higher pay-outs.

Am I correct that the 10% tax to which you are referring is the tax on prizes paid by OPAP?

does that apply to those who invest through a IRA? I believe so.

OPAP operates a monopoly in the gaming industry (mostly lottery and sports gambling). The Greek government owns 30%, which is why they pay-out almost everything to shareholders via dividends. The Greek gaming market is about to expand to allow online gambling. OPAP will capture most if not all of this market, which will consist of former customers lost in recent years to illegal online gambling. Average 10-year Return on Equity is 100%. OPAP has no debt...

Ditto. On behalf of certain [unqualified] clients I have some money in Fairholme and wrote him earlier this year. Bruce Berkowitz Fairholme Capital Management, L.L.C. 1001 Brickell Bay Drive, Suite 3112 Miami, FL 33131 Telephone: 305-358-3000 Date 04/27/10 Dear Bruce, Naturally, I applaud your temperament over the last two years. The below discussion will not at all be new and you will certainly recognize the issues of my concerns and I hope you choose to act on them in short duration. From my perspective, $10 billion is the point at which size really begins to constrain performance, the consequence of a rapidly decreasing universe of investments. With respect to Fairholme, you must be thinking whether it makes sense to keep the fund open or otherwise to close it to new investors. If to keep it open there must be clear evidence that in doing so, current investors will not suffer as a consequence. That is, the rate and duration of compounding returns that you can reasonably expect to earn while open to new investors must either be equal to or exceed the reasonably expected returns of Fairholme as a fund closed to new investors. Prior to the asininities of the last two years, size was an increasing concern, however the ensuing fiasco provided conditions which made incremental (external) capital attractive to all Fairholme investors. You addressed the question of size during a conference call last year, and I believe you were completely correct in your response, brief as it was. However, these conditions are not what they were a few months ago and I don’t know that a compelling argument can currently be made in favor of keeping the fund open-unless you are expanding your operations to international markets, you intend to employ future capital in the purchase of private businesses, or contributions are offset by distributions/redemption’s, but even under these circumstances it would be a difficult argument. Sincerely yours, Matt Pauls

Oh, and for those wondering about dividends, US investors pay a total tax of 30% from distribution to bank account.

You're all intelligent enough to recognize the obvious risks involved in Greece, so I'll just provide the numbers. Summary Data http://mattpauls.com/opap/opapsum.png Income Statement http://mattpauls.com/opap/opapIncome.png Balance Sheet http://mattpauls.com/opap/bal1.png http://mattpauls.com/opap/bal2.png Other http://mattpauls.com/opap/totals.png (For those interested) Comps http://mattpauls.com/opap/comps.png Total % Change 2005-2009 Earnings 30% Price -65%

This argument is certainly lacking.

Normal, long-term Treasury Yields certainly matter.

It's a significantly good book. It's also very concise. I've spoken to Sokol for about 45 minutes a few years ago. He is super smart, sharp, and really clear headed. He's the real deal. Buy the book.

ditto on dell.

You can watch the testimony again on cspan or otherwise here: Investing In Knowledge

I think of dell as a service and distribution business, not so much tech. Further, I quite like their current position.

This is a wonderful move that's been in the making for some time.

I'm not sure why I keep involving myself in this conversation, because I really don't have a clue here, but considering the demographics, there are a lot of people retiring that are almost certain never to consider anything but Microsoft. Struggling to learn a new OS I don't think is an option for most people 55 and up. They didn't grow up with computers and don't care to understand them beyond what they already know. I'm not saying it's really that hard to switch, but the perception is that it is hard. I suppose my point is that I don't see Microsoft's revenue going away anytime soon. Bill & Steve have a good reason to keep MSFT from dying, but we'll have to wait and see. Shares %OS Value Gates (William H III) 660,971,294 7.54 18,950.05 Ballmer (Steven A) 408,252,990 4.60 10,500.27

Really quite funny: In 1917 Graham published an article in American Mathematical Monthly, while a student at Columbia: http://mattpauls.com/info/2010/06/ben-graham-calculus-article-published-1917/

You have no idea how disappointed I was to discover that this hearing will take place in N.Y. Errrr.

Here's my take on the two. (1) Both are good businesses. (2) From an owner's perspective, Microsoft is still the better business. (3) From an investment perspective Apple is way too expensive. (4) Where will each company be in 5 years? Both have very uncertain futures. The attractiveness of Apple's current numbers-the fact that they have no debt and lots of cash-may make apple look like a pretty good investment. It also seems like everyone wants either an ipod-touch, iphone, ipad, or mac computer, not to mention itunes and the app store earn a good amount of money. Do I dare suggest that Microsoft is currently a better buy than Apple? That is exactly what I'm suggesting. At the current price Apple is simply just not that attractive, especially when compared to Microsoft. Plus your buying earnings, yet both have income streams that are hard to figure out even 5 years down the road. These are not one foot hurdles. Uncertainty is a big factor for both Microsoft and Apple. But which is likely to have a better fate in 5 or 10 years from now. As it stands Apple seems to be putting out the hot products while any mention of Microsoft is generally to complain about Windows. Apple has to defend several markets simultaneously, Microsoft doesn't and still owns the operating system business. Apple has to defend against, Google, HP, Dell, Motorola, HTC, Microsoft etc. Microsoft has Apple & Google-tough, but doable. That is, Apple has several huge businesses in separate markets chomping at their heels waiting for a slip-up, not to mention the guy operating out of his garage, so if apple does not stay ahead in terms of making people think their next cool gadget is worth the premium, then in 5 years they will certainly not be in the same place they are today-in terms of economics. Though economics are certainly the primary driver of value (and therefore also price) over the longer term, markets often react to short term perceptions. Should Apple's perceived prospects be anything but stellar 5 years from now, the price is almost certain to be proportionally lower in the future. Don't let our current perceptions of relative prospects cloud rational thought. By rational thought in this sense, I mean over-weighing what we think we know, but don't. Finally, as you'll see in the graphic below, Apple has not paid a dividend in over 10 years and have had to put every dime back into the business. Net, Apple's issued significant amounts of stock-diluting owners. I'm an advocate for apple products and I have both a mac and an iphone, but if I were forced to buy one, I'd by Microsoft. Thankfully I'm not forced. Their futures are too uncertain. I think many people betting on Apple are over-weighing what they think they know, but don't. Even if you love apple's prospects, if you do the math I think you'll end up agreeing with me. http://mattpauls.com/images/AAPLvsMSFT.jpg Matt

Not that there were any doubts, but Munger confirmed that Li Lu was the first to tell him about BYD. http://i.cdn.turner.com/money/.element/apps/cvp/4.0/swf/cnn_money_384x216_embed.swf?context=embed&videoId=/video/news/2010/05/04/n_munger_china_economy_byd.cnnmoney

You might then like these: 126 pages of Ben Graham Journal Scans ;> http://mattpauls.com/assets/BenGrahamJournalScans.pdf

clap, clap.

Do a search on the board, there are plenty of discussions about this.

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I will but the video is huge and took forever to load on the site. I intend to do so and it will be uploaded in parts by next week.

not sure why, but its back up.